The increase reflects low housing inventory and rising builder confidence.
After dipping by 0.7% in October, housing starts were back up in November. They rose 11.8% month-over-month to a seasonally adjusted rate of 1.68 million units, according to a report released Thursday by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Construction of single-family homes increased 11.3% to 1.17 million units, while the construction of multifamily units increased 12.9% to 506,000 units.
“Breaking an eight-year trend, in recent months there have been more single-family homes under construction than multifamily units,” National Association of Home Builders chief economist Robert Dietz said in a statement. “Moreover, despite some cooling earlier this year, the continued strength of single-family construction in 2021 means there are now 28% more single-family homes under construction than a year ago. These gains mean single-family completions will increase in 2022, bringing more inventory to market despite a 19% year-over-year rise in construction material costs and longer construction times.”
HUD and the Census Bureau are attributing this increase in production to strong demand for new construction. As housing inventory across the country continues to remain at historic lows, it comes as no surprise that many prospective homebuyers are turning to new construction.
November saw a decent increase in residential construction jobs with 4,100 residential building jobs and 6,200 residential specialty trade contractor jobs created. In addition, this rise in housing starts also reflects an increase in homebuilder confidence.
“Mirroring gains in the HMI reading of builder sentiment, single-family housing starts accelerated near the end of 2021 and are up 15.2% year-to-date as demand for new construction remains strong due to a lean inventory of resale housing,” Chuck Fowke the chairman of the NAHB said in a statement.
Regionally, on a year-to-date basis, combined single-family and multifamily starts are 24.4% higher in the Northeast, 9.6% higher in the Midwest, 15.4% higher in the South and 19.4% higher in the West, compared to the same time period a year prior.
Looking into the new year, overall housing permits increased 3.6%, with single-family permits rising 2.7% and multifamily permits rising 5.2%, suggesting that new inventory, in the form of new construction, will eventually hit the market, helping alleviate some of the crunch felt by such low inventory levels.
“The bottom line is we need more homes and it will take time to reduce the housing stock ‘debt’ in the face of growing demand,” First American deputy chief economist Odeta Kushi said in a statement. “But today’s housing starts report, in combination with a positive builder’s sentiment report, sends an optimistic message about the housing market as we enter 2022.”